In these difficult times, it makes sense to recognise the situation and not hold on to unrealistic pricing
The last three to four months have brought about a change, the world has never seen. No, I am not referring to Obama being elected as first African American President. I am referring to the flashback scene of robust demand, positive stories and all that noise about growth and development that existed until end of September which has now not only disappeared but has brought about drastic and quick reactions by various companies.
USA has been going through a recession for almost a year plus, the credit crunch and global recession has added fuel to fire. While back here in India we are still positive, based on a hunch that everything will be all right soon; I admire our courage.
Inflation when I last checked was at 5.76% or thereabouts, compared to August 2, 2008 when it was at 12.91%. Now that is one good thing that has come out of this quick turn of events. But is that really good? A lower inflation rate only goes to prove that the slowdown is real and here to stay.
Even though we are all aware of these facts, I discovered that most sellers in the resale segment are still stuck to their fancy prices in South Mumbai and a few other locations in the city. While they admit there is a slowdown and markets have softened, their sale price does not match their knowledge. The worst thing is that few brokers, especially the International Property Consultants (IPC's) who have employed socalled 'professionals', who have perhaps not seen more than three winters in real estate are the ones guiding sellers on prices and valuation. Actually, all they are doing is agreeing with what the seller wants, bringing us all back to a stalemate situation. It's like being at a junction of a traffic signal of Mumbai and the signals are off and everyone at the junction is trying to make their way.
Is this the way ahead? Unless one wants to be stuck in a jam all day, I don't think so!
As I have understood, what brokers and sellers are still doing is latching on the last sale price as benchmark and working on 5% lesser valuation. I wish to share with you an incident from October. A client who lives at Pedder Road, was wanting to sell a two-bedroom apartment. The building is on the main road but the apartment is on the back with a green view. The apartment size is approximately 1200 carpet and it's a well kept home. I gave a valuation of Rs.30,000/- a sq. ft. which brings us to a figure of Rs 3.60 crores and said that the range could be Rs 3.60 to 4 crores maximum.
Since our focus, as a company, is only on the luxury and high-end segment, I asked my client to contact a colleague who I thought was thorough in knowledge in that location to look into it too and assist the family sell the property. Would you believe the valuation given by them was of 5.50 crores? Now obviously, I look like the bad guy and suddenly the other broker like a hero, almost as if the broker was going shell out Rs 5.50 crores for the apartment. I know you are curious - yes the apartment is still on the block for sale and I don't think it would fetch over Rs 3.50 crores today.
On the rental front I was recently approached by a luxury property owner who has rented his property to a MNC for a long period of time, saying it's time for renewal and the tenants want to reduce the rent and I would like to look for a new tenant. I asked if he knew of anyone hiring in these times and where does he think a new prospect would come from? Very quickly he found the answer in my question and asked me what he should do. My advice to him and most owners is to be realistic. I know the landlords and owners who rent have had the shortest ride in the upswing of prices, which lasted only from March 2007 to June 2008; but enjoy the rent you are currently getting, because it makes no sense to keep your property vacant - with no rent at all. Consult a professional broker to renegotiate your deal. If he can get you better terms, then great, if not be content. It is worth paying the broker the renewal brokerage fees to negotiate for you because more often than not when you are in direct confrontation with the tenant or the company you tend to get into a deadlock situation.
Similarly, for sellers my advice is to do a 'Reality Check' with sound professional advice and for buyers there is no need to do panic buying.
THE VIEWS EXPRESSED BY THE AUTHOR ARE PERSONAL